Internet Gambling: Past, Present and Future
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View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by OPUS: Open Uleth Scholarship - University of Lethbridge Research Repository University of Lethbridge Research Repository OPUS http://opus.uleth.ca Faculty Research and Publications Williams, Robert 2007 Internet Gambling: Past, Present and Future Wood, Robert T. Elsevier Wood, R. T. & Williams, R. J. (2007). Internet gambling: Past, present and future. In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies (pp. 491-514). Burlington, MA: Elsevier. http://hdl.handle.net/10133/422 Downloaded from University of Lethbridge Research Repository, OPUS 1 Internet Gambling: Past, Present and Future Robert T. Wood Department of Sociology, University of Lethbridge Robert J. Williams School of Health Sciences & Alberta Gaming Research Institute University of Lethbridge Table of Contents 1. Introduction 2. History of Internet Gambling 3. Current Situation 4. Prevalence of Internet Gambling 5. Comparative Legality of Internet Gambling a. United Kingdom b. Other European Countries c. Australia d. New Zealand e. Canada f. United States 6. Demographic Characteristics of Internet Gamblers 7. Game-Play Patterns 8. Why do People Gamble on the Internet? 9. Problems with Internet Gambling a. Unfair or Illegal Business Practices b. Unfair or Illegal Player Practices c. Internet Gambling by Prohibited Groups d. Problem Gambling e. Lack of Responsible Gambling Practices 10. Future of Internet Gambling 11. Researching Internet Gambling 12. References 13. Footnotes Key Words gambling, Internet gambling, online gambling, legality, problem gambling Glossary Problem gambling: gambling to the extent that it causes significant harm to the individual or people within that person’s immediate social network In: Smith, G., Hodgins, D., & Williams, R.J. (eds.), Research and Measurement Issues in Gambling Studies. San Diego, California: Elsevier Publishing. Published in 2007. pages 491 –514. 2 Introduction Beginning in the early to mid-1990s, as Internet access expanded into workplaces and private residences, gamblers in Western societies were introduced to a new realm of Internet- based gambling opportunities. Indeed, all of the traditional forms of gambling, widely available in land-based venues, soon appeared in electronic format over the Internet, and have since been easily accessible to any person with an Internet connection and means of electronically transferring money. Virtually mediated casino games, slot machines, bingos, lotteries, sports wagering, horse race betting, and skill games are all now readily accessible, with new forms of gambling and new sites being added each year. Moreover, the number of peripheral or supporting sites is also growing, including gambling website portals, information pages containing odds and payout figures, and pages for sports handicappers. The proportion of people who actually gamble online remains relatively low, but is growing as more jurisdictions regulate and legalize Internet gambling opportunities, and as Internet gambling becomes more socially acceptable. While Internet gambling is becoming more and more a normalized activity, the expansion of Internet gambling is out-pacing peoples' understanding of the phenomenon, as well as outpacing many of the laws that are supposed to regulate gambling activity. Consequently, we find ourselves in a situation where we have insufficient knowledge of Internet gambling, including the characteristics of gamblers, the social and psychological dynamics of Internet gambling behavior, the potential link between Internet gambling and problem gambling, and the most appropriate regulatory and legislative stance to take with respect to Internet gambling. In light of continued and rapid expansion, and in light of existing ambiguities and gaps in current knowledge, this chapter seeks to highlight the major trends and issues associated with Internet gambling today. This is not meant to offer a definitive answer to all questions and issues that are emerging from the current state of Internet gambling. Instead, recognizing that much more research is needed in most areas, this chapter merely seeks to highlight crucial domains of knowledge and research on Internet gambling, as well as any resulting implications. History of Internet Gambling Three important developments set the stage for the emergence of Internet Gambling in the 1990s. The first was the small Caribbean nation of Antigua and Barbuda creating a ‘free trade zone’ in 1994 that effectively allowed U.S. bookmakers (based in Antigua) to accept bets by phone on horse racing and sports, theoretically immune from U.S. gambling prohibition laws. The second was the development of gambling software by Microgaming in 1994/1995. The third was the development of encrypted communication protocols by CryptoLogic in 1995 that allowed secure online monetary transactions. In 1995 a few sites (e.g., Gaming Club) began offering casino gambling games online without real money being wagered. Sports books (e.g., Intertops Casino and Sports Book) also started posting odds online as well as toll-free numbers to call to place bets. In 1996 InterCasino, based in Antigua, became the first online casino to accept a real money wager online (4 Online Gambling.com, 2006; Schwartz, 2006). 1 It did not take long for other Caribbean islands (e.g., Turks and Caicos; Netherland Antilles) and other online sportsbooks and casinos to follow suit. To better ensure legal protection, most online gambling companies chose to base their operations in small Caribbean or European jurisdictions with permissive 3 gambling legislation. Prosecution of some prominent online companies with connections to countries having clear online gambling prohibition reinforced this trend (e.g., Starnet Communication in Canada in 1999). By the end of 1996 about 15 online sites accepted wagers. A year later, over 200 sites existed. By 1999 this had increased to 650. By 2002 it was approximately 1,800 sites (Schwartz, 2006). Revenues had similar increases. Hammer (2001) estimated that Internet gambling generated $2.2 billion US in 2000, compared to only $300 million several years earlier. For the most part, this expansion was initiated by new companies not associated with any land-based gambling venues. In 1999 Lasseters in Alice Springs, Northern Territory (Australia), became the first land-based casino to go online. U.K. based William Hill and Ladbrokes are established land-based sports/racebooks that went online in 1999/2000. Tentative forays were made by a few other land-based companies (e.g., MGM Mirage, Aspinalls, Kerzner International). However, because of the grey legal status of online gambling, most established companies opted not to do anything that might jeopardize their licenses. The initial online sites were exclusively sports/racing books and online casinos, with sports betting accounting for more than half of Internet gambling revenues in 2001 (American Gaming Association, 2006a). The first online poker room (planetpoker.com) went online in 1998. A major expansion of online poker began in 2003 when the World Series of Poker became a popular televised show in the United States. Many of the entrants for the World Series qualified via online poker tournaments, and both the 2003 and 2004 champions were online poker players. In 2003 the estimated revenue from online poker was $365 million, which increased to approximately $2.4 billion in 2006 (Christiansen Capital Advisors, 2005). Another type of gambling that was later introduced was online lotteries where people could either purchase tickets for land-based lotteries or play virtual lotteries or instant win tickets. Online bingo games were also added, partly to attract more females to online gambling (Henderson, 2005). The most recent additions have been ‘skill game sites’ and ‘betting exchanges’. Skill game sites offer a wide range of word games; puzzle games; strategy games (e.g., mahjong, chess); sports games (e.g., billiards, mini golf); card games (e.g., solitaire); arcade games (e.g., carnival shootout); video games; and trivia games. Most typically, players pay a fee to enter a tournament, with the winner(s) collecting the majority of the entrance fees. Sometimes the contest can be with another specific individual and sometimes it can be against your own previous ‘high score’. Betting exchanges are sites that create a marketplace for bettors whereby they post potential wagers on certain events (with accompanying odds and stake size) in the hope that someone will take them up on their offer(s). These wagers are primarily on sporting and horse racing events, but also include wagers on politics or reality television events, etc. Current Situation In October 2006 there were over 2,500 Internet gambling web sites owned by 465 different companies listed at www.online.casinocity.com.2 A few of these companies are publicly traded on the London Stock Exchange, but most are privately owned. The online sites consist of 1083 online casinos, 592 sports and racebooks, 532 poker rooms, 224 online bingos, 49 skill game sites, 30 betting exchanges, 25 lottery sites, and 17 backgammon sites (Casino City, 2006). A unique aspect of online gambling is the availability of ‘free play’ at most of these sites, ostensibly to familiarize the person with the game and to improve their skill. However, research suggests that a more nefarious purpose is sometimes to deceive players into 4 thinking the odds of winning are better